Why Single-Family Rentals Stopped Working (And What to Buy Instead)

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0:00 There are some glaring problems with
0:02 single [music] family investing right
0:03 now. On today's episode, I'm going to go
0:05 over what the biggest hurdles are, and
0:07 I'm going to make a case for you on why
0:09 you should shift your business model.
0:10 Not because single family never works,
0:12 but the ways that you make it work are
0:15 not sustainable and not scalable. I'm
0:17 going to go into this in detail, and I'm
0:19 going to propose a business plan that
0:20 will work much, much better for you on
0:23 this episode. And I think it's going to
0:24 be a lot simpler. So, if you're looking
0:25 at building single family, duplex,
0:27 triplex, forplex, maybe it's the price
0:29 point, maybe there's some angle or
0:31 gimmick that you found online where
0:33 you're like, "Hey, I think I can scale
0:34 this and push my margin." I'm going to
0:36 make a case that is going to save you a
0:38 lot of time and ultimately make you a
0:40 lot more money. Oh, by the way, welcome
0:41 to the channel. Why would you listen to
0:42 me? Well, I've done a whole lot of these
0:44 businesses. I've done Airbnb. I've done
0:46 short-term. I've bought duplexes. In
0:48 fact, I've bought 11 duplexes in my
0:50 portfolio. Today, I own almost none of
0:52 them. I've done the small property
0:54 thing. I've done large properties. I've
0:56 also done boutique resort. I own the
0:58 Robin Hood Village Resort at 18 cabin
1:00 resort with waterfront. So, when you're
1:01 talking short-term, long-term, multif
1:03 family, single family, I have done it
1:06 all. I will tell you what works. If you
1:08 want to know how to make the most money
1:10 with the least amount of effort and
1:11 ultimately, I think have the most fun.
1:13 I'm going to show you how to do that
1:15 exactly in this episode. So, let's dive
1:18 right into it. the glaring issues. And
1:20 you've probably seen this all over
1:22 online. There's a whole bunch of
1:23 influencers that are going, "Oh, rentals
1:25 no longer work. You just can't buy for
1:27 cash flow anymore." Well, first of all,
1:29 that's absolutely BS. I would never in a
1:31 million years buy a deal that doesn't
1:33 cash flow day one. Tried it. Don't like
1:36 it. Every time that you buy a rental
1:38 property, it needs to increase your
1:40 income. That way, every time you close,
1:42 you get a raise for the rest of your
1:43 life. If you repeat this again and again
1:44 and again, ultimately, you end up with a
1:46 ton of money coming in relatively
1:49 passively every single month. If that
1:51 sounds good to you, I'll tell you, being
1:53 on the other end of this, it feels
1:55 pretty good. It's nice to not have to
1:57 worry about the money coming in and
1:59 minimal hours of working on acquisition
2:01 and management. I really like it. I
2:04 highly recommend. So, why doesn't single
2:06 family work? Well, the first thing, and
2:07 I think the most important, single
2:09 family is not designed to be an
2:11 investment. It's designed to be a house
2:13 for people who want to live at the
2:16 property.
2:17 People want to buy houses. This has
2:19 always been the American dream. Now,
2:20 yes, we're slowly shifting to a renter
2:22 nation, but we're not there yet. The
2:24 core American dream is still, hey, I
2:26 want to save up one day, buy a house.
2:28 And as someone who's owned multiple
2:29 houses that I've lived in, it's fun to
2:32 own your own space. It's fun to get to
2:33 design the own space, especially as
2:35 people get into the age where they want
2:36 to start a family. There's a lot of
2:38 advantages to home ownership that they
2:40 don't teach you on the financial classes
2:42 or the like, oh, just always rent your
2:44 space. Sometimes you just want to own
2:46 where you live. And I think that's a lot
2:48 of Americans, which means the pricing is
2:51 designed for people who want to own
2:52 where they live. What else is single
2:54 family designed for over the past few
2:56 years? Because of the difficulty in
2:58 getting cash flow in single family that
3:00 was never designed for cash flow, people
3:02 have found different ways to push the
3:04 margin. Airbnb was the big one, though
3:07 it's slowly dying. There's still a lot
3:09 of Airbnb. There's mid-term rentals that
3:11 are currently actually working very well
3:13 as a strategy for a lot of people. I
3:15 actually think it's the best single
3:16 family strategy currently available.
3:18 Higher margin, midterm leases, and
3:21 there's a bunch of different ways to get
3:22 them. And then you have the people who
3:24 are doing the co-living. It's my least
3:26 favorite way to push the margin, but
3:28 they essentially make everyone
3:29 roommates. It's managementheavy. It's
3:32 difficult to scale, but it's a way where
3:33 you can push that income much much much
3:35 higher for an individual single family
3:37 property. Because of this, people are
3:40 finding ways to make more money with
3:41 them, which means people will pay more
3:43 money. So, if you do conventional
3:45 purchase and you're competing with
3:47 people who want to live in the house and
3:48 call it their own, or people who have
3:50 other methods to make a higher yield
3:52 than you, other people are willing to
3:54 pay more than you are for the same
3:56 property. Therefore, you no longer can
3:59 cash flow in single family in most
4:00 markets. The only places that we're
4:02 consistently seeing cash flow is areas
4:04 with declining population. You can buy
4:05 so cheap that you can get to cash flow.
4:09 Now, you have to ask yourself, do you
4:10 want to have an entire portfolio full of
4:12 cheap properties? Is your goal, hey, I
4:15 want to have a cheap I want to be the
4:17 best slum lord in the country. I don't
4:19 think so. At least that's not a business
4:20 I'm interested in. Not rewarding. And
4:22 also, because they're inexpensive, you
4:24 have to do a ton of transactions. If
4:26 you're talking about adding like a $100,
4:28 $200 of cash flow a month every
4:30 transaction. If you're trying to get to
4:32 $10,000 a month or more, you're going to
4:34 have to buy again and again and again
4:37 and again and again. And one disaster
4:40 happens at one property, it can wipe out
4:41 most of your cash flow. So single family
4:44 doesn't work for a series of reasons.
4:47 Too many transactions to get from A to
4:49 B. The competition's wrong. And it's a
4:51 business that's not designed to be a
4:53 business. you are taking a normal single
4:55 family residence and trying to make more
4:58 money off it. Here's the case for multif
5:00 family and why I really like this or if
5:02 you want to do the short-term rental
5:03 thing, why you should do boutique hotel
5:05 as opposed to the individual Airbnb.
5:09 It's easy to get in the mindset of,
5:10 well, it costs less money, so it's
5:12 easier for me to get in. I'm going to
5:14 dispel that right now. The bigger the
5:15 deal, typically the easier the raises.
5:17 until you get into the multi-million
5:19 dollar raises,
5:20 it's more attractive for more people to
5:22 invest in something that's bigger than
5:24 they can do on their own. So, your
5:26 actual ability to buy these low to no
5:28 money out of pocket is going to increase
5:30 dramatically. And again, boutique hotel
5:32 and midsize multif family. We're talking
5:34 five to 50 units. We're not talking
5:37 Titanic properties. We're not talking
5:38 the 300 unit mega complex that just got
5:41 built right down the street. We're
5:43 talking about something built in the
5:45 80s, 90s, early 2000s. It's five to, you
5:48 know, 50 units at the most. That is a
5:52 sweet spot where you can operate. It's
5:54 low capital raises. It's not capital
5:56 intensive. You can attract investors,
5:58 too. And it's designed very specifically
6:01 to cash flow. So, that's argument number
6:04 one. Buy bigger will actually make it
6:06 easier. So, if you're stuck in the
6:07 mindset of like, well, it costs less, so
6:09 it's easier to obtain. I need to find
6:11 less money. Stop doing that immediately.
6:13 You create an opportunity. That
6:15 opportunity, the cash flow and the
6:17 upside of the actual opportunity is what
6:19 attracts capital. In my experience, and
6:21 I do have a good deal over the last 32
6:23 transactions, it is much easier to raise
6:26 a million dollars for a fantastic cash
6:28 flowing deal than a speculative single
6:30 family house. Your investor pool is
6:32 actually much larger. A million dollars
6:34 in multif family, much easier to find
6:37 than $100,000 in single family. So,
6:39 that's my first piece of advice for you.
6:41 Second, it's the scalability. I only
6:43 need to succeed about once a quarter.
6:45 And really, twice a year would still do
6:47 it. If you bought a couple of 25 unit
6:49 buildings and each of these cash flow
6:52 three $4,000 a month, you add $8,000 a
6:55 month for life and it adjusts with
6:57 inflation. So, every year it goes up a
6:58 little bit over time on average. You do
7:01 very very well here. But if two
7:03 transactions can get me to eight n
7:05 $10,000 a month, and I do this every
7:08 single year consistently,
7:11 once every half year, once every
7:12 quarter, maybe up to four deals, you
7:15 start accumulating hundreds of rental
7:17 units without doing a lot of volume. the
7:19 sustainability of this, the management
7:21 of this, the systems, you can build a
7:23 business that spits out tens of
7:24 thousands of dollars instead of scraping
7:27 your way to your next five or 10
7:29 thousand dollars over multiple years
7:30 with tons of transactions and a lot of
7:32 headache. My last argument, negotiating
7:36 deals, single family, you tend to get a
7:39 whole lot of problems in the small
7:41 properties buying from the small momand-
7:44 pop owners. They're usually selling
7:46 because there's some problem with the
7:47 property. They bought it to be passive.
7:49 They run it incorrectly. It's not
7:51 passive at all. You're coming in and
7:52 fixing substantial problems. That's a
7:54 majority of the deals we see. So, you
7:56 have to push the margin by building an
7:58 ADU. So, you have to be a little micro
8:00 developer or you have to switch the use
8:03 to Airbnb and spend the time, money, and
8:05 risk to get it there. On multif family,
8:07 you are negotiating the deals based on
8:09 the cash flow today and the future
8:11 upside, which is just a factor of how
8:13 well you run the property. The
8:15 appraisals are done on your net
8:17 operating income, not on what your
8:19 neighbors just sold their property for.
8:21 So, your ability to find debt products,
8:23 to find capital, the transaction volume,
8:25 everything is easier. And at the end of
8:26 the day, walk around a 25 unit building
8:30 or a 50unit building. The feeling you
8:33 get being like, I own this versus
8:35 walking in front of a random house
8:37 somewhere that you'll probably never go
8:38 in again. It's a different feeling. It's
8:41 a bigger business. you it's more
8:44 rewarding and ultimately you're
8:46 providing housing to people who want to
8:48 rent. You're not taking homes off the
8:50 market. You're not competing with
8:51 everyone else. So hopefully those five
8:53 or six reasons is enough to change your
8:55 mind if you're looking at single family
8:56 to go, "Hey, this year, right now I'm
8:59 filming this in 2026, right in the
9:01 beginning of 2026.
9:03 If you're sitting here going like, "Hey,
9:04 2026 is my year to dive into real estate
9:05 and I think I'm going to go buy my first
9:07 investment house." Here's my challenge
9:08 to you. Increase it by five units. Do
9:11 something commercial. It doesn't have to
9:12 be huge. Buy a 5plex, buy a 12plex,
9:15 do a slightly larger property where
9:17 you're going to find easier to manage,
9:19 more availability, more cash flow,
9:21 easier to find the money, easier to
9:23 close, and easier to manage. Hope this
9:27 [music] helps. I'll see you guys on the
9:29 next episode.